British Secretary of State for International Trade Liam Fox, left, shakes hands with Japanese Minister of Economy, Trade and Industry Toshimitsu Motegi at a meeting in Tokyo on Tuesday.

Photo: AP

Japan is considering creating a sovereign wealth fund to invest in US infrastructure projects and US-Japan joint projects in third countries, and will float the idea at two-way trade talks in Washington next week, the Nikkei Shimbun reported yesterday.

Tokyo is seeking ways to counter US pressure for a bilateral free-trade agreement (FTA) and head off a rise in tariffs on its auto exports when Japanese Minister of Economy, Trade and Industry Toshimitsu Motegi meets US Trade Representative Robert Lighthizer in Washington on Thursday next week.

Motegi told a news conference yesterday that he wanted to “take some ideas” to the talks, adding that Japan would not make concessions that would hurt its national interests.

Japanese Minister of Finance Taro Aso said separately that Tokyo was in various talks with Washington on infrastructure, but had no specific plan to set up a sovereign wealth fund.

“Japan and the United States are holding various discussions in this area, but at the moment there’s no concrete consideration towards establishing a fund,” Aso told reporters at a regular news briefing.

The Nikkei Shimbun said that Japan would raise capital from the private sector through bond issues as early as the business year beginning April next year and provide low-cost government and possibly public-private loans, taking advantage of the Bank of Japan’s hypereasy monetary policy.

It added that the size of the fund has yet to be determined.

The proposal for the fund also urges converting money raised into foreign currency if the yen strengthens beyond about ￥100 to the US dollar, a move that might open Japan to criticism of currency manipulation to keep the yen weak, Nikkei added.

A ruling party source with knowledge of US-Japan ties said that a sovereign wealth fund for infrastructure has been under consideration since April and would likely come up when Motegi meets Lighthizer, but a Japanese government source said that such a plan was not being deliberated and was unlikely to be feasible. Both spoke on condition of anonymity.

Japanese Deputy Chief Cabinet Secretary Yasutoshi Nishimura on Wednesday told Reuters that Japanese firms were keen to invest in the robust US market and that the government wants to “firmly support and back that.”

He did not elaborate.

The reported sovereign wealth fund proposal comes after US Secretary of State Mike Pompeo this week announced a US$113 million initiative in technology, energy and infrastructure in Asia, and a trilateral push by the US, Australia and Japan to invest in regional infrastructure projects.

It echoes an idea floated last year to buy US dollar-denominated “infrastructure bonds” as a way to take part in US President Donald Trump’s upgrade of US infrastructure.

Sumitomo Corp chief financial officer Koichi Takahata told reporters the trading house was interested in social infrastructure as a growth sector and would consider it if there were a stable supply of funds and a way to hedge against country risk, a concern in some third countries.

Trump wants a two-way trade pact as a way to cut the US’ trade deficit with Japan, but Tokyo is wary because an FTA would boost pressure to open sensitive markets such as agriculture.

Nishimura and other Japanese officials have said Japan is expected to increase its imports of liquefied natural gas from the US and buy US military gear needed for its defense, both of which would help reduce the trade imbalance.